Analysis & Opinion

NEW YORK (Reuters) - Private equity firm Silver Lake Partners bid as low as $11.22 per share for Dell Inc in mid 2012, when it first discussed a buyout with founder and CEO Michael Dell, according to a person familiar with the situation.

Since then, on February 5 this year, Silver Lake and Michael Dell raised their bid to take the world's No. 3 personal computer maker private to $13.65 a share. At $24.4 billion, it would be the largest private equity-led buyout since the 2008 financial crisis.

When the bid was first announced, the price represented a 25 per cent premium over the stock price before news of the bid, but Dell's share price closed at $14.31 on Friday.

The computer maker has said repeatedly that the bid comes only after extensive review and negotiations, and has deemed it fair to shareholders and that view will likely be emphasized again in an upcoming proxy filing with the SEC.

But some analysts say Michael Dell and Silver Lake may eventually raise their bid to try to appease investors in Dell like Southeastern who complain it undervalues the company.

Michael Dell is trying to complete his company's transition from a low-margin PC maker into a provider of computing services. The makeover has become more urgent as the PC market shrinks. Analysts say it might best be carried out if the company were taken private, away from public shareholder pressure and scrutiny.

BID DISCUSSIONS GO BACK TO MID-2012

CNBC first reported the opening bid and, according to the business television network, private equity house KKR & Co LP had also discussed a bid for Dell at $12 to $13 a share but dropped that offer in December last year.

Several major shareholders voiced opposition to the bid including Southeastern Asset Management and T. Rowe Price.

A second person familiar with the matter told Reuters that Southeastern, Dell's largest independent shareholder, had itself broached the possibility of a leveraged buyout to Michael Dell in the summer of 2012, when it expressed interest in contributing its equity in Dell toward any deal.

But two other sources familiar with Southeastern's thinking told Reuters the firm had not touched on any sort of private equity-led buyout deal during talks with Michael Dell last summer.

These sources said Southeastern proposed a transaction similar to one it outlined on February 8 in a letter to the board, when it outlined a so-called "Dutch auction" or tender offer to all shareholders, the two sources added.

Southeastern's objection to the current bid, like that of many other investors, is that the buyout as it stands severely undervalues the corporation.

All sources asked not to be named because the matter is not public. Dell did not respond to requests for comment and Southeastern declined to comment.

A clearer picture of the negotiations leading up to the deal is expected to emerge in the last week of March in a company proxy filing.